Insurance Jottings

London Market launches delegated authority platform

The London Market Group (LMG) is launching its delegated authority platform this week as a core part of the London Market Target Operating Model (TOM).

 

DA SATS provides a central service to standardise the collection, validation, processing, and supply of delegated authority data across the market.

 

Market take-up from brokers and underwriters has been strong and, at launch, half the underwriting and broking businesses that focus on delegated authority business had signed up for the service, with four of the five largest managing agents on board, according to a corporate statement.

 

Data will be flowing through the platform from go-live and this widespread market adoption will enable a quick and convenient submission of risk, premium and claims data in the London Market, the statement added.

 

Fidelis adds energy market capacity with new MGA Kersey

Bermuda-based Fidelis Insurance has acquired an equity stake in a new managing general agent – Kersey Specialty – which will focus on upstream energy subscription market insurance.

 

The underwriting capacity will be provided by Fidelis, and Kersey will be managed through Fidelis’ subsidiary MGA platform Pine Walk Capital.

 

The company has appointed Paul Calnan, who has 30 years of re/insurance experience in the Lloyd’s market, to run Kersey.

 

Mr Calnan began his career at Lloyd’s in 1988 with Octavian Underwriting and subsequently developed upstream accounts at Navigators, CV Starr and more latterly at Ironshore.

 

Lloyd’s profit halves in first six months despite underwriting improvement

Lloyd’s pre-tax profit halved in the first six months of 2018 due to a lower investment return and despite an improvement in the combined ratio.

 

The pre-tax profit fell to £588 million in the first half of 2018 compared with £1.22 billion in the same period a year ago.

 

Pre-tax profits were impacted by a reduced investment return of £204 million compared to £1.04 billion in the first half of 2017. This is consistent with the low returns seen across most asset classes over the period, according to a corporate statement.

 

At the same time, the combined ratio improved from 96.9 percent to 95.5 percent over the period.

 

The underwriting result was £0.5 billion in the first half of 2018, up from £0.4 billion in the same period of 2017. This partly reflects Lloyd’s ongoing work which commenced in 2017 to review the worst performing portfolios, and the subsequent action by the market to reduce loss making lines, Lloyd’s noted. Gross written premiums increased to £19.34 billion from £18.88 billion over the period.

 

Outgoing Lloyd’s CEO Inga Beale stressed the return to profitability in her comments after the severe catastrophe losses experienced in 2017.

 

“These results and return to profit demonstrate the strength of the Lloyd’s market following one of the costliest years for natural catastrophes in the past decade.

 

“Whilst these results are welcome, Lloyd’s continues to concentrate on improving the Lloyd’s market’s long-term performance by taking action to address underperforming areas of the market.

 

“The corporation also remains focused on making the Lloyd’s platform more competitive.

 

Alongside the success of the mandate for the placement of electronic risks, we have recently launched the Lloyd’s Lab, our new innovation accelerator, which will help Lloyd’s use technology to better serve our customers around the world.

 

“We have also worked tirelessly to secure the Lloyd’s market’s access to the EU27 and our Lloyd’s Brussels subsidiary will start writing business in the European Economic Area from the 1st January 2019.”

 

Thomas Miller acquires MGA operations

Insurer Thomas Miller has acquired the managing general agency (MGA) and insurance services operations of Hamburg-headquartered specialist insurance services group Zeller Associates.

 

Zeller is an international provider of risk related and insurance services mainly for shipping, trade and transport, and also for specialist areas such as the cruise and tourism industry.

 

It is made up of six distinct operational businesses covering services including insurance underwriting and management, claims handling, loss adjusting and expert investigations.

 

Headquartered in Hamburg, the operation employs 37 people.

 

Lloyd’s Market Association & Lloyd’s Issue Policy Documents in Preparation for Brexit

A new suite of policy documentation, to support the underwriting of risks from the European Economic Area by Lloyd’s Brussels, has been published.

 

The new documents were prepared by the Lloyd’s Market Association’s (LMA)* wordings team, working closely with the Lloyd’s Brexit and regulatory affairs teams.

 

In advance of Brexit, Lloyd’s has established a new Brussels-based insurance company, Lloyd’s Insurance Company SA, which from will underwrite non-life insurance and facultative reinsurance risks located in EEA countries from the 1st January 2019.

 

The new policy documentation for Lloyd’s Brussels includes:

 

  • generic coverholder certificates and open market policies, with country-specific variations where required
  • ancillary clauses such as service of suit, language declaration clause, data protection/privacy notices
  • complaints notices for individual countries.

 

Alison Colver, head of wordings, LMA, said: “We are pleased that, through the collaborative efforts and hard work of the respective teams at LMA and Lloyd’s, we have been able to prepare and publish these documents, ahead of January renewals, and of course, Brexit.”

 

For ease of access by the market, all the documents and clauses, including a new Coverholder Appointment Agreement for use through Lloyd’s Brussels, have been published within the dedicated “Lloyd’s Brussels” section of the Lloyd’s Wordings Repository (LWR).

 

Translations of certain documents will also be published on the LWR as soon as they are available.

 

* The Lloyd’s Market Association (LMA) represents the interests of the Lloyd’s community, providing professional and technical support to its members.

 

Drivers of Marsh & McLennan – JLT Deal: Too Much Capital, Not Enough Growth

Too much capital and not enough growth. Faced with this ailment, the insurance sector is reaching for a costly remedy — M&A.

 

On the 18th September, Marsh & McLennan Companies Inc became the latest insurance industry participant to splash the cash, agreeing to pay £4.3 billion (US$5.6 billion) for Jardine Lloyd Thompson Group Plc.

 

JLT is smaller than the likes of Marsh & McLennan, Aon Plc and Willis Towers Watson Plc. Scale and diversification are competitive advantages. JLT risked being further eclipsed.

 

Marsh & McLennan’s approach came earlier this month just as sterling was bouncing off a year low against the dollar. A currency advantage matters little given the lofty purchase price. The £19.15-a-share offer was a 34 percent premium to JLT’s closing price on the 17th September. That may look standard for takeovers, but the stock was a whisker off its all-time high. The price is 25 times JLT’s estimated 2019 earnings, compared with an average trading multiple of 17 for its bigger listed peers.

 

JLT’s independent directors could not turn this down on any rational assessment of the company’s prospects. Small wonder that Jardine Matheson Holdings Ltd, which holds 40 percent of the shares, accepted the bid.

 

Marsh & McLennan has some overlap with JLT in the UK, presumably contributing to the projected cost savings of US$250 million a year.

 

Conservatively valued, these are worth about £1 billion net of implementation costs, roughly the size of the premium.

 

Marsh & McLennan will therefore need flawless execution, plus some additional savings, to make this deal actually create value for its shareholders.

 

The high price and support of Jardine Matheson make it hard to see a gate-crasher breaking this up. But the drivers of this deal remain for others. French mutual insurer Covea Group’s pursuit of reinsurer SCOR SE remains unresolved, and other large insurers have similar pressures to do M&A. It may not be too long before the next deal.

 

Hanover Insurance sells Chaucer to China Re

The Hanover Insurance Group, Inc has announced it has entered into a definitive agreement to sell the entities comprising Chaucer, its Lloyd’s-focused international specialty business, to China Reinsurance (Group) Corporation (“China Re”), for total proceeds of US$950 million, including cash consideration from China Re of US$865 million and a pre-signing dividend from Chaucer of US$85 million, received in the second quarter of this year.

 

The transaction will position The Hanover to continue the successful expansion of its domestic business, building out its strategic capabilities for its partners and customers.

 

The transaction is anticipated to close late this year or in the first quarter of next year, subject to regulatory approvals and other customary closing conditions. Tangible equity of Chaucer(1) as of the 30th June 2018, was US$520.0 million, net of US$73.2 million of goodwill and intangible assets.

 

The total consideration, adjusted for the pre-signing dividend, represents a multiple of 1.66 times Chaucer’s tangible equity as of the 30th June 2018. The transaction is structured so that, subject to certain exceptions, the risks and rewards of Chaucer’s business from the 1st April 2018 until closing, are transferred to China Re.

 

Cash consideration of US$865 million (excluding the pre-signing dividend of US$85 million) consists of initial consideration of US$820 million payable at closing and contingent consideration of US$45 million to be held in escrow, which may be adjusted downwards if catastrophe losses incurred in 2018 are above a certain threshold.

 

The Hanover estimates the sale will result in a net GAAP after-tax gain which will be recorded in discontinued operations at sale execution. Beginning in the third quarter of 2018, the earnings results for Chaucer operations will be reported as part of The Hanover’s discontinued operations for all periods presented in The Hanover’s financial statements.

 

The closing is subject to regulatory approvals, including the Prudential Regulation Authority, Lloyd’s of London and required approvals from the regulatory entities of the People’s Republic of China, in addition to approval from China Re’s shareholders